Monday, June 13, 2011

P&G's Organic Growth Strategy

Business Week reports on new P&G CEO Bob McDonald's strategic push to emphasize organic growth over acquisitions, particularly growth in emerging markets. I must say that I applaud any CEO who is willing to put a priority on organic growth vs. acquisitions. I think too many chief executives fall in love with doing deals, rather than doing the hard work required to grow existing brands. Moreover, too many firms pay an overly high price tag for deals.

Having said that, the P&G organic growth strategy has some risks. First, a company of that size must generate a ton of new growth simply to "move the needle" - i.e. to grow the overall top line by a small percentage. Second and perhaps more importantly, P&G must take care not to diminish its brand equity in various product lines as it tries to grow in emerging markets. Under McDonald's predecessor, A.G. Lafley, P&G definitely shed many of its lower-priced brands and focused instead on premium positioning of its products. That strategy proved very successful. Now, however, to grow in emerging markets, P&G will face pressure to offer lower-priced versions of its products. The question is this: Can P&G effectively maintain its premium strategy in the developed world while catering to lower income customers in emerging markets? In an increasingly global economy, might that strategy dilute certain brands? In the past, it may have been easier to position brands differently in different countries. That has become a bit more difficult with globalization, increased international travel, and the like.

Michael Roberto

The Great Courses

About Me

I am the Trustee Professor of Management at Bryant University in Smithfield, RI. I joined the faculty after serving for six years on the faculty at Harvard Business School.

My research, teaching, and consulting focuses on leadership, with a particular emphasis on decision-making and teams. I have published two books based upon my research: Why Great Leaders Don't Take Yes For An Answer (2nd edition to be released in May 2013), and Know What You Don't Know (2009).